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en-usTechdirt. Stories about "npd"https://ii.techdirt.com/s/t/i/td-88x31.gifhttps://www.techdirt.com/Wed, 27 Feb 2013 11:11:00 PSTMusic Industry Data: Sales Up, Piracy Down... But It's Not Because Of Any 'Anti-Piracy' EffortsMike Masnickhttps://www.techdirt.com/articles/20130227/01483822127/music-industry-data-sales-up-piracy-down-its-not-because-any-anti-piracy-efforts.shtml
https://www.techdirt.com/articles/20130227/01483822127/music-industry-data-sales-up-piracy-down-its-not-because-any-anti-piracy-efforts.shtmlactually increases sales, so we looked closely at the numbers and they don't seem to say what some people think they're saying. The Hollywood Reporter has a good summary of both reports. One comes from IFPI, celebrating that "global recorded music revenue" rose 0.3% in 2012. That is, obviously, a tiny increase, but it is an increase. Of course, as we've noted, "recorded" music revenue is merely one piece of the wider music industry ecosystem -- and that entire ecosystem has been growing for quite some time.

The second report comes from one of the industry's favorite researchers, NPD, claiming a massive decline in music file sharing (based on consumer surveys). I've found NPD's data to be suspect in the past, but let's just assume this is true. Then, can we reach the conclusion that the industry's anti-piracy efforts both worked and that it led to increased sales?

Actually... no. Not even close. We can see this pretty clearly just by looking beyond the recorded music market, to the wider file sharing space. Various reports have made it clear that widespread file sharing (mostly of infringing content) has continued to grow quite rapidly during the same time period. Sandvine reports (pdf) that BitTorrent traffic increased 40% over the same basic time frame. Or, zero in on a different market beyond music. How about software? The BSA's annual report continues to show increases in "piracy."

What does that say? Well, if wider anti-piracy campaigns were effective, we wouldn't just be seeing a decline in music infringement. We'd see similar declines across the board. But the overall space and some other, similar, markets are showing increases in infringing content spreading.

That leads us to the much more reasonable hypothesis: the reason that music piracy is down and revenue is up is because the industry has finally started allowing more innovation into the market. Not surprisingly, this is exactly what we've been arguing for years. If you let the tech industry create useful new services that better provide the public with what they want, you get services and products that people are willing to pay for. And when that happens, infringement decreases, because the legitimate and authorized services are better than infringing. It's why music infringement fell off a cliff in Sweden when Spotify launched there, despite also being the home of The Pirate Bay. Notably, when music infringement plummeted in Sweden, other types of infringement did not similarly drop.

In other words, for all the complaints about these new services, and the many, many attempts to hold them back or neuter them, letting new services grow and thrive seems to be the best "anti-piracy" measure that the record labels could have used. And yet it still thinks it needs to focus on punishing fans and limiting services.

Some of the data demonstrated that P2P file sharers (who own digital music files) buy more music than their non-P2P using peers (who also own digital music files). Here's the chart again:

To me, this was a fairly innocuous finding, well in line with other studies. For my money, the more important findings were that personal sharing 'between friends' is about as prevalent and as significant in music acquisition as 'downloading for free', and that together they are outweighed by legal acquisition.

But the public spoke and the P2P finding went viral: the biggest pirates are the best customers. Headlines like this generated pushback from record industry groups RIAA and IFPI--mostly centered around the work of NPD, their survey firm in the US. The exchange, I think, is an interesting window onto the state of the empirical debate around file sharing.

At the risk of boring you, here’s the chronology:

Oct.15: We argue that P2P users are the biggest buyers of recorded music. The story jumps from TorrentFreak to Gizmodo to many many other sites.

We hear this argument all the time and it makes no sense.... Peer-to-peer users tend to be younger and more Internet-savvy, so the likelihood that would be buying digital files makes perfect sense. But you can't compare that to the entire population.

Oct. 17:We point out that we didn't compare P2P users to the general population, but to digital music file owners (50% of the US population; 42% in Germany). We acknowledge that our labeling was a little ambiguous on this point, so we fixed it. We noted that "if NPD has data that suggests otherwise, perhaps they could share it."

Oct. 17: IFPI weighs in, arguing that NPD says that most P2P users are moochers, even if a few skew the average by buying a lot:

P2P users spent US$42 per year on music on average, compared with US$76 among those who paid to download and US$126 among those that paid to subscribe to a music service. The overall impact of P2P use on music purchasing is negative, despite a small proportion of P2P users spending a lot on music.

Another 9% said that 10% or less of their music file collections were purchased.

The median music file collection, among P2P users, is around 50% purchased.

And 15% said that their whole collection was purchased (suggesting that they used P2P for other purposes).

It’s a diverse group, but not moocher-dominated. We stand by our claim.

Oct.19:Then Russ Crupnick at NPD writes a piece that accuses us of publishing while drunk and also lacking a license to make proper sense of data (not joking about this). He repeats that you can't compare P2P users with the general public, and then notes that we're right about P2P users—but also wrong because it's dumb to be right about this.

P2P music downloaders do indeed buy more music than non-users. We’ve known that for about 10 years. It’s a dumb, illogical and irritating argument.

He then brings out his presumably non-drunk, licensed findings and, well, there are a couple things to say.

First, he gets his math wrong by including the subtotal in the grand total (h/t Michael Geist). Possibly this is advanced licensed math of some sort. I wouldn't know.

Second, when corrected, the numbers are pretty similar to ours! P2P users do buy more legal music than non-P2P using music buyers. And if you add in concert and merchandise, they spend quite a bit more on music.

As near as I can tell, Mr. Crupnick has no actual disagreement with us on the P2P findings. That’s just smoke and mirrors. Rather, he want to make two other claims:

First, that even though P2P users buy more than others music buyers, they buy less than they used to.

The average P2P user spent $90 per capita on music in 2004- now they spend $42 (CDs, downloads, subscriptions). This was during the same period when the number of files illegally downloaded per capita was rising.

Our spending numbers would look higher, but we agree with the basic story. Here’s how we put it.

[P2P users] are better digital consumers. But is also clear that this investment has fallen vis à vis large CD-based collections. The survey offers ample evidence of this shift in the way music aficionados relate to music–no longer organized around large CD collections or measured in terms of individually priced songs or albums, but rather defined by a mix of legal and illegal strategies for accessing everything now.

Then he gets to what he really wants to talk about:

Celebrating P2P users for their contribution belies the fact that the paid component of the music that they acquire, aka their acquisition mix, is 50% less than the average music consumer.

And so the moral order is restored. Or is it? On any normal reading of the post, this makes no sense: P2P users can't simultaneously spend more and 50% less than other music buyers. (Admittedly, I've had a few drinks and should probably leave this to the metaphysicians at NPD.)

But I'm willing to go the extra mile and assume that Mr. Crupnick is just being unclear, rather than contradictory. Maybe the "paid component" refers to the percentage of overall collections, not to the annual "spend" on music. This would have the virtue of making the statement true, in the self-evident sense that P2P users acquire more music than they buy. In our formulation above: the median music file collection, among P2P users, is around 50% purchased.

But it wouldn't make the statement relevant. At this stage of the game, knowing who supports the music ecosystem and what their expectations are matters a great deal. The fact that P2P users pirate, on the other hand, only matters if your main strategy for increasing sales is enforcement. Boiled down, Mr. Crupnick's point is that it's more important to stigmatize the pirate than understand the customer.

In reality, the comparison is unfair – what it’s comparing is people who are interested in music with people who might not be interested at all. Of course people interested in music buy more. But as research firm the NPD Group (which has been studying these issues for a decade) points out here, this data is neither new, nor illustrative. In their words, “Celebrating P2P users for their contribution belies the fact that the paid component of the music that they acquire, aka their acquisition mix, is 50% less than the average music consumer. Yes, that’s half the average.”

For what it’s worth, I think piracy does play a role in declining purchases of recorded music, but I also think there are so many forms of disruption in the market that it’s impossible to isolate that impact. Here’s how we put it in a post called Die Substitution Studies, Die II: Well, Maybe Some Should Live.

We’ve argued that the media ecology has become so complicated that nobody has a handle on what substitutes for what. Does a pirated MP3 file substitute for a $1 purchased file, a $12 CD, some number of listens on YouTube or Spotify or radio? Does Spotify substitute for MP3 purchases? Or YouTube listens? Should we take stagnant discretionary income into account, and rising costs for other media services, like cable TV, Internet access, and data plans. Do national differences matter–including major differences in digital markets and services (In Germany, CD sales represent over 80% of the market; in the UK and US, under 50%).... Which of these factors get priority? How do we model their interaction?

Increasingly, we don't think it matters. For younger music fans, the primary connection to music no longer passes through carefully curated CD (or MP3 ) collections but through the universal jukebox approximated by overlapping services--iTunes, YouTube, Spotify, The Pirate Bay, and your friends' collections. The total spend is shaped not just by the availability of pirated music, but also by the close complementarity of other free and cheap music services and by the greater competition for discretionary income and attention from other media--games, DVDs, apps, data plans, concerts, and so on.

So what’s at stake in all the misdirection and cheap shots? In a generous mood, I'd say carelessness. In a less generous mood, I'd say it sounds like resentment that he has to debate this stuff at all. Ten years ago, he didn't have to. Send out the press release, watch it get picked it up, and call it a day. NPD and RIAA simply owned the discussion. Now they have to nitpick with academics.

Companies like NPD make money not just by surveying people about their habits, but also by ensuring that the data that they make public leads toward conclusions their clients like. This is the noxious side of an advocacy-driven research culture. And for many research firms, it produces occasional schizophrenic moments: the social scientist warring with the company man. Maybe that's what we're seeing here. The P2P results may have been obvious and "known" for years but I can find no trace that NPD thought them worth mention before this exchange flushed them into the open. NPD has tons of data and could make a huge contribution to public understanding of these issues, but that's not their job. Dissonant findings stay confidential.

Which is too bad, because in the end, Mr. Crupnick arrives at many of the same conclusions we do. From earlier this year:

"There are always going to be those who look for bootlegs and songs you can't find on sites like Spotify and Rdio, and there will always be people who see illegal downloading as a sort of game, but I think that number will just get smaller and smaller as other options become more convenient with all your devices," says Russ Crupnick, senior entertainment industry analyst for NPD.

The reason for this, as Crupnick and others note, isn't because of potential legislation that mirrors SOPA so much as the growing number of cheap, legal alternatives to illegal downloading combined with the decline of many well-known file-sharing sites.

So what's he defending? Not different data or even significantly different findings, but just his client's failed monopoly on interpretation. But that drunk horse has left the barn.

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]]>less-is-morehttps://www.techdirt.com/comment_rss.php?sid=20121114/07180721044Fri, 27 Jul 2012 08:06:36 PDTRIAA Knows (But Tried To Hide) That Most 'Unpaid' Music Acquisition Comes From Offline SwappingMike Masnickhttps://www.techdirt.com/articles/20120726/20131119853/riaa-knows-tried-to-hide-that-most-unpaid-music-acquisition-comes-offline-swapping.shtml
https://www.techdirt.com/articles/20120726/20131119853/riaa-knows-tried-to-hide-that-most-unpaid-music-acquisition-comes-offline-swapping.shtmlcomes from person to person copying, via hard drive trading and burning/ripping from others. P2P and cyberlockers actually make up a relatively small percentage:

To be fair, I've found NPD's numbers to be suspect in the past, but they are one of the RIAA's favorite vendors for this kind of data. So, if even they're showing that online file sharing is relatively small, then that's at least noteworthy. The fact that this information had been kept "confidential" certainly suggests that the RIAA knows this highlights how all of their freaking out over online access to unauthorized content is exaggerated, and that people can and will find plenty of other ways to share.

One hopes that this doesn't presage more attacks on such person to person sharing either, but I wouldn't bet on it. Remember, we're talking about an industry which has regularly sought to plug the analog hole. When we see proposals in Congress that would effectively allow Customs officials to start searching hard drives and MP3 players, you have to wonder if the entertainment industry is really gearing up to go after this kind of sharing as well.

Of course, what would be much nicer (and a hell of a lot more effective) is if they finally woke up to the fact that this is a reality -- and that there are ways to deal with it on the product and business model sides, rather than on the enforcement side. If they put one-tenth the effort into helping out with that as they do for pushing for greater enforcement, the online music landscape would look so incredibly different and would be so much better for everyone.

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]]>online-piracy-is-a-footnotehttps://www.techdirt.com/comment_rss.php?sid=20120726/20131119853Fri, 25 Mar 2011 08:29:51 PDTDrop In P2P File Sharing Due To Limewire Shutdown A Pyrrhic Victory For The Recording IndustryMike Masnickhttps://www.techdirt.com/articles/20110324/16194713614/drop-p2p-file-sharing-due-to-limewire-shutdown-pyrrhic-victory-recording-industry.shtml
https://www.techdirt.com/articles/20110324/16194713614/drop-p2p-file-sharing-due-to-limewire-shutdown-pyrrhic-victory-recording-industry.shtmlan apparently large dropoff in P2P file sharing in the fourth quarter, which it attributes to the closure of Limewire. I had hesitated to get into this, because NPD's numbers and analysis have historically been suspect, so I always take anything that comes from them with a pretty large grain of salt. They also work for the usual suspects, calling into question some of their objectivity.

And, indeed, there are certainly some questions about the accuracy of the report, which involves self-reported user surveys -- generally not the most reliable method of getting accurate data on something like file sharing (especially in the wake of something being shut down for being "illegal.") That said, the numbers are big enough that even if they're a bit off, it certainly does suggest something happened, and just to be nice, I'll even grant the basic premise that file sharing in the US slowed down when Limewire shut down. Limewire historically has been popular, though not with the more technically savvy folks, but with a more general crowd, who tended to treat it much more like radio than as a way to "obtain" music.

But here's the big question: assuming we accept this massive dropoff in P2P file sharing, was there a corresponding jump in music sales?

I am pretty sure that we won't see a corresponding giant leap in music sales for the same quarter. And that's kind of the point that we've been making all along. For all this talk of enforcement, why can't anyone provide any evidence that it actually leads people to go back to buying stuff? In the case of Limewire, since most users didn't really look at it as a replacement for sales, but as a replacement for radio, it's not likely that they're suddenly going to run to start paying. Instead, they'll switch to other options, whether it's YouTube, Pandora, GrooveShark or something else. If Spotify were actually available in the US, I would bet that it would sop up many ex-Limewire users.

And that's really the major point here. Rather than seeing this decrease as a "victory" for the RIAA (as some have suggested), it highlights what an astounding lost opportunity it has been. Limewire, whatever its faults, was very eager to work with the recording industry to monetize the massive user base it had. And the record labels refused, just as they refused to negotiate with Napster a decade ago (something many in the industry now claim to regret -- despite the fact that they've done it again and again and again). So rather than taking that opportunity, it's been squandered. Similarly, if the record labels got their act together, services like Spotify would have launched in the US long ago. But the labels keep demanding more and more ridiculous conditions on the deal, and thus, the people go elsewhere... often to places where the labels won't get paid at all.

This is what happens when you mistakenly think that the thing to focus on is stopping infringement rather than making more money. It's the "but... but... piracy" argument all over again, where people get so focused on that, they forget the endgame. So, sure, the shuttering of Limewire may have stopped people from using P2P to obtain files. But will it actually get people to buy? Unlikely. And that's a massive squandered opportunity.